FOREIGN EXCHANGE | Roxanne Uy, Singapore

Local currencies slowly becoming a substitute for G3 currencies?

Bankers believe local currencies are getting more important, but warns that their potential highly depends on the economic and trade positions it commands in the global arena.

ABF: What are your thoughts on the rise of local currencies as a potential substitute for G3 currencies?

DBS: Teo Kang Heng, Managing Director, Corporate Advisory, Treasury & Markets
The potential of any local currency to become a substitute for G3 currencies depends highly on the economic and trade positions it commands in the global arena and the potential strength of its currency. The Chinese RMB is one such currency that has gained popularity as a substitute for USD in recent times. To maintain its popularity as a substitute, China will have to widen the use of its currency to include capital markets and investment products.

CITIC Bank International: Woody Chan, Treasurer
Getting more and more important esp the trade flow in Asia is growing tremendously. CNY / JPY FX quotation started recently in Mainland China is a good example. Given long time, local currencies, like CNY, will place a much more important role in FX / trade settlement.

Oliver Wymann: Jason Ekberg, Consultant
It’s a very real reality though it depends on a number of factors, e.g., liquidity/pricing, store of value (cash mgmt. / investment), regulatory treatment, etc. The USD has historically providing attractive pricing and stable store of currency. This said, we are seeing intra-Asia liquidity rise, for example Korean bank’s issuing in Thai Bhat and growth of Samuri bonds in Japan. SGD has also proven a strong currency and is an Asia wealth management hub. There’s also the questions about RMB which everyone is talking about, e.g., RMB trade finance, commodity solutions, etc. 

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